Pandora’s Geo-targeted Ads Latest Example of Online Advertising Beyond the Banner

There’s been quite a lot of talk lately on how some Web publishers are moving beyond standard banner ad formats in favor of customized units as a way to increase viewer engagement and clicks. And no wonder with click-through rates for standard IAB banner formats on the decline across many properties.

One big shift, especially among social media sites, is to integrate ads squarely into page content as opposed to on the periphery of a page like most banner units. For example, social news site Digg just recently began flowing ads into the stream of its page content as a way to increase subscriber interaction.


Another good example of this is music service Pandora.com’s placement of ad units squarely into its music player. But Pandora is taking it a step further by adding geo-targeting to the matter.

For example, this morning while logged into Pandora an ad was served up by the Paper Mill Playhouse, which is several blocks from my house, for the musical play “The Full Monty.” Obviously I was targeted for this ad based on IP information from my browser.

I could only wonder if they are also using information about my music preferences (which as a subscriber is stored in their databases) as a way to serve up ads that would be of interest to me. For instance, knowing I like indy rock an ad for “The Full Monty” makes sense – but for "South Pacific," probably not. Some might think this is a little creepy – I don’t, just a way to deliver more relevant and useful information.

This Time it’s Volvo’s Turn to Experiment with Social Media

Major consumer brands are starting to explore ways to integrate social media into their advertising campaigns - last month it was Skittles, and this month it was Volvo.

In Volvo’s case they promoted their new XC60 crossover SUV with a one day only YouTube page takeover to coordinate with the New York Auto Show. To spice things up, the takeover included a live feed of XC60 Twitter updates from the auto show.

This is the first time YouTube ran such a prominent ad on its homepage. This is no doubt part of Google’s (YouTube’s owner) effort to generate more revenue from YouTube which, it has been widely reported, has been a serious drain on Google’s profitability.

While it’s too early to tell what kind of impact Volvo’s gambit will have on XC60 sales, to me this is a great way to raise awareness and create a dialogue with consumers.

It’s almost a certainty that more marketers will follow suit in the coming months with their own social media experiments. As with anything else, there will be fits and starts but it’s only a matter of time before social technologies become commercialized as a platform for highly targeted online advertising.

The Online Ad Industry Needs to Get Serious About Privacy

In a previous post I discussed dynamically generated display ads and how they represent the next wave of innovation in online advertising.

http://marketingmemes.blogspot.com/2009/02/now-appearing-at-browser-near-you.html

Unfortunately, this next round of innovation is potentially in jeopardy. A critical component of this evolving online ad model is a technique known as behavioral targeting (BT). BT involves making assumptions about a person’s interests based on things like the Web sites they visit, their profiles on social networking sites and the types of things they search and then serving them customized ads based on those assumptions.

FTC's 2007 Guidelines
While the data used by BT methods is anonymous, there is still quite a bit of controversy around the technique. Privacy groups criticize it as intrusive (if not creepy). And the Federal Trade Commission has been keeping an eye on BT since December 2007 when they issued voluntary guidelines to Web sites delivering targeted ads in an effort to protect consumer privacy.

Apparently, no one was listening. Last week the FTC issued a follow up report on the issue. The report reinforced the FTC’s commitment to industry self-regulation (i.e., voluntary compliance) but this time added tough words for the online ad industry which it claimed is not moving fast enough to address the privacy issues. They also commented that if the industry does not make substantive efforts to address these concerns regulations or even legislation might be required.

http://www.ftc.gov/os/2009/02/P085400behavadreport.pdf

Concerns with Current Privacy Practices
Privacy groups and the FTC have a host of grievances with current targeted-ad practices:

• They don’t clearly explain what information is being collected and how it is being used
• The explanations are not easily accessible and are normally buried deep in lengthy privacy policies
• They are not convinced that the data collected is completely anonymous
• They are concerned that Web sites are combining personally identifiable data (addresses, birth dates, etc) with anonymous data captured through BT methods

What the FTC is Requesting
The FTC report laid out guiding principles for Web site privacy practices including provisions for:

• Clear, accessible and plain language statements about the behavioral data they’re collecting and how it will be used
• An easy way for consumers to opt-in or out
• Security policies for collected data
• The length of time data will be retained considering legitimate business needs

The report was not specific regarding the types of notice Web sites should provide to consumers. Some have proposed links on banners that lead to an explanation of the data collected, how it will be used and opt-in and opt-out features.

Regulation and Innovation – Rarely a Good Combination
eMarketer is projecting a 300% spending increase in targeted online advertising in the next three years – strong growth in a down economy. A lot of this growth will depend on investments Web sites make in new technologies to enable more sophisticated ad-targeting.

The last thing we need is for the government to dampen that growth by imposing a set of onerous regulations. The online ad industry has a clear choice: figure out a way to improve online consumer privacy notifications or the Federal government will figure it out for us.

Now appearing at a browser near you - online advertising 3.0

Despite all the advances in digital marketing, the process by which online ads are produced is still manual for the most part. And, once these ads are placed they are largely static; if updates are needed (e.g., if the ads are not performing well) some level of human involvement is required.

This situation is changing thanks to process and technical innovations that now allow advertisers to serve and update their online ads dynamically (i.e., automatically) by leveraging a combination of predefined business rules, real-time data, algorithms and pre-developed creative assets. The financial and strategic benefits from these innovations, while not yet fully realized, will be huge for the $28+ billion U.S. online ad market.

The next wave – more efficient production = reduced costs for marketers
The amount of time and money that will be saved by these innovations cannot be underestimated: web designers and developers no longer have to build by hand every online ad unit to every size; and agency media managers no longer need to send scores or even hundreds of ad units to web site publishers.

In terms of marketing effectiveness the impact of these innovations will change the game for online advertising. Advertisers can now do complex, multivariate testing and deliver custom, just-in-time creative that is more relevant and targeted to specific marketing situations.

Automating multivariate testing
Advertisers can now test a conceivably unlimited number (easily into the hundreds) of banner creative configurations to identify the combinations of elements (messaging, imagery, call-to-action, etc) that deliver the best results. Previously, this level of testing was highly impractical since the effort needed to create the number of banner versions to generate statistically relevant test results made it cost prohibitive; in most instances costs simply out-weighed benefits.

More relevant, effective and efficient online ads
This is where things get interesting. Marketers can now deliver much more relevant and targeted ads to consumers by combining customized, just-in-time banner creative with a variety of data about their target consumers, including:

• Geography
• Prior online behavior
• Their stage in a multi-step shopping/purchase decision process
• The editorial focus of the web site where the ads will be placed

Here are some examples of how these innovations are being used to deliver more relevant online advertising:

Sequential messaging – banner ad messages change based on where a consumer is in a multi-step shopping/purchase decision process (this is especially useful for highly considered purchases like automobiles, health insurance, etc)

Contextual messaging – banner imagery and messaging change based on the editorial theme of the site where an ad is running (e.g., personal finance, sports, travel, etc) to increase contextual relevance

Geographic targeting – here ads are customized with messaging or imagery that is relevant to a specific state or region of the country

Real-time targeting – ads can also be updated with real-time information (e.g., sports scores, time of day, weather) using live data feeds to create timeliness or a sense of urgency

While many of these online targeting approaches were previously available the ability do it dynamically wasn’t. So the next time you see an online add that is uncannily relevant to your unique situation it probably isn’t a coincidence. Some people may think this level of targeting is spooky. Personally, I prefer this over the alternative – like seeing ads for Brilliant Blonde Shine Shock hair treatment on my Yahoo! Mail sign in page.